It`s time to abolish costly exemptions

The Tanzania Revenue Authority granted tax exemptions amounting to Sh1.016 trillion during the year 2011, which was an increase of 49 percent compared to the previous year.

In 2010, exemptions cost taxpayers a total of Sh680 billion. The total tax exemption issued last year was 18 percent of actual tax amount collected by the TRA, amounting to Sh5.5 trillion.

To put things into perspective, the total exemptions granted to various institutions, if used for one item, would have purchased 500,000 tractors. That is a lot more than the much touted ‘Kilimo Kwanza’ drive needs in order to succeed.

In simple arithmetic the 500,000 tractors if distributed to 100 farming districts, gives each district 5,000 tractors, more than we might possibly need in the short term to enable our agriculture output to surge rapidly.

Alternatively, amounts granted as exemptions would have funded 50,000 students at all universities for two years at the cost of Sh10 million for each student eligible for an education loan.

The money is equal to what the Tanzania government borrowed from the Chinese bank last year to finance the construction of a major gas pipeline from Mtwara to Dar es Salaam. While we granted exemptions amounting to Sh1 trillion, just a few months ago, the Tanzania Electricity Supply Co. was struggling to borrow Sh480 billion from a consortium of local and international banks.

It’s time now to abolish these costly tax exemptions if we really want to boost the government’s revenues. For instance why grant an exemption to a government official who buys a fancy Mercedes Benz S500, which is not productive to the economy?

It’s appalling to see that at a time when the world is struggling with a prolonged economic crisis, we are busy granting huge tax exemptions at our own peril. Gone are the days when exemptions were granted to anybody provided he is in the good books of the Finance Minister.

Present are the days when the government should stop unnecessary exemptions as well as lavish spending, if it really wants to survive economically and politically in future.

Last year we strongly condemned the government’s move to allocate about $800 million (Sh1.2 trillion) for allowances to government officials during the 2011/12 fiscal year. This is another way of misuse of public funds.

Let us not spend beyond our means. The government should understand that it collects our taxes, and in return, it pays us back by investing in economic and social development. Failure to that is justification for it to be ousted by the voters through the ballot box.